You can become a better negotiator. Why does this matter? Well, let’s just say that by following these techniques and starting to implement these in your life,
- you’re going to save money.
- You’re going to save time.
- You’re going to really save a lot of your scarce resources when you’re out there and
- you’re not afraid to start using this stuff.
It’s true that there are a lot of myths out there, a lot of misconceptions, and I’m going to try to give you some timeless, proven techniques so that you can become a better negotiator.
Most People Aren’t Very Good At Negotiations
The number one thing you need to understand about negotiations is that most people aren’t very good at it. Why does this matter? Because if you understand that, you realize that by making a small investment in upping your negotiation skills, you’re going to be able to get a lot of mileage out of that. You start to up your game just a bit and all of a sudden, you’re setting yourself apart, the same thing with negotiations. By starting to apply proven tactics — and the stuff I’m going to mention, the other tips, a lot of this comes out of research that’s been done by people at really smart schools, University of Texas, Harvard, Stanford, all of these schools where they have gone. People with 20-pound brains have done all this research and this stuff works. So simply by reading a book on the subject, you’re going to elevate yourself by taking a course. Again, understand that most people are pretty bad and most people actually think that they’re a decent negotiator. When it comes down to it, they may be about average because they’re just not applying the right techniques.
The number two thing that you need to pay attention to is understanding yourself. Now, I know this seems pretty general, so I’m going to get a little bit more specific, but first off, you need to know what your BATANA is. BATANA stands for “Best Alternative To A Negotiated Agreement”, again, one of those terms that came out of one of those really big books out of Harvard. Basically, the BATANA is where you’re not going to go anywhere less than. Any of you guys out there who own a company, if you’ve ever agreed to something, you take a step back and maybe the next day or even later that day, you’re like, “Man, why did I agree to that?” You know what I’m talking about? You’ve felt that because you didn’t have a set BATANA when you went into the negotiation. We negotiate all the time. Every time you go into a store and you make a purchase, there’s a bit of a negotiation there. It seems like it’s one way, but there are a lot of stores that you can actually bargain with. Now, in the United States or United Kingdom or most developed countries, a little bit harder, but if anyone has traveled abroad mostly to developing countries, you’ll see that bartering and going back and forth, and a little bit of negotiation happens a lot. When you can go to a vendor at the end of the day, he’s got fruit that he needs to get rid of. This is going to go bad. He’s going to throw it out and you can make an offer. But when you know your BATANA, that you know — let’s just, I guess, use the fruit example. You know the fruit has to be at this level because if you were to pay for it and if it was at a lower quality level than you’re willing to accept, you’re not going to like the agreement. You’re going to have a certain amount that you’re willing to pay and if you go beyond that, then you know that you’re going to not be happy because you’ve got to be careful in a negotiation. This again is part two of knowing yourself, is be careful of focal points. These are emotional things that — we’re emotional beings, so oftentimes, there are certain things that we focus in on in a negotiation and we get laser-focused and we forget about all the other things around the negotiation. This often happens when someone is going in to negotiate for their salary. If anyone’s worked for a company, you realize there’s a lot more than working for a company than the money.
– There’s also how many hours are you going to be expected and required to work,
– how much leave time,
– how much sick time.
– Can you work on Fridays
– or maybe Mondays from home
– How much travel are you going to need to do?
– Are you going to get these in your contract?
There are all these other things, but oftentimes when we’re negotiating our salary and whenever you’re getting hired, that’s actually when you’re in your best point to negotiate. We’re just looking at one thing – the salary. We’re not necessarily going to look into all these other things.
If you’re a family person, you might realize that honestly, I am fine with the salary, but I would rather go with these other points i’ve made.
This leads to point three, knowing others. Know the person you are negotiating with.
Understand the Situation
point four, and that’s understanding the situation. Many negotiations are — it’s not just a one-shot deal. Many of them are repetitive or it’s a long-term negotiation. you’ve got to think about the situation, so that’s number four. Scarcity, ideology, those are things. If you look at what’s going on in the Middle East, there’s a reason why they have had conflict for as long as — gosh, over what, a couple thousand years? It’s simply ideology, the inability for people to agree on some very basic fundamentals. Scarcity, let’s look at California, Arizona, and Nevada. Well, they’re going to have a water issue here very soon because there’s only so much water. Right now, California has taken more than its fair share. That negotiation agreement I think is already up or it’s going to be. There’s going to be a huge thing there because there’s a scarcity of water. In addition, you want to look at is this a negotiation of necessity or opportunity. Now, if anyone is a Star Trek fan, do you remember the part where the Klingons actually had to negotiate with the federation because — what was it — something exploded. I don’t remember which Star Trek it was, but they’ve got to negotiate because basically, it’s out of necessity, versus the negotiation of opportunity is one that probably both parties could walk away from a little bit easier. Is agreement required? Whenever you’re getting a divorce, an agreement is required versus other ones in which an agreement isn’t required.
Make the First Offer to Anchor
Let’s go to number five, which is make — and I’m going to give you some very specific things that you can do in a negotiation to make sure that you get the best deal beyond your BATANA.
The first one is make the first offer if you are prepared.
If you’re not prepared, there’s another type of thought that says go ahead and let them make the first offer, and actually see if it goes well beyond your BATANA, and then09:51try to raise it up.
But if you’re prepared, if you know a whole lot about them and you know yourself, you understand the situation, then you can go ahead and put in a very pinpointed offer, and the power of doing this is you set an anchor.
The Power of Fairness
We’re also going to talk about the power of fairness. Now, this one’s very interesting because they’ve done these tests in which they show people — they give people a dollar. They said, “Okay, you guys need to divide it up. One person is going to divide it. However, the other person can veto the whole deal and say, ‘Well, no deal and we’re not going to get anything.'” What they find is that a lot of people, they simply go 50-50 because it’s fair. It seems like that’s the right thing to do, but what happens when someone starts going 60-40, 70-30, and literally — because they’re the one dividing and they get to take the first share, and then they’re going to leave that 30 cents or that 20 cents for the other person. Well, shouldn’t that other person just accept it? I mean, it’s better than getting zero, but logic doesn’t apply here because they violate the rule of fairness. The farther they do violate that rule, most people are going to say, “That is not fair. You’re completely ripping me off and I’m going to go with zero,” and they do it. Come on. Let’s think about it. It makes no sense. Even if it’s a penny, you’re actually a penny richer, but what has been violated is the perception of fairness. So when you’re in there — and this is so important — that you know the other person because if you violate their perception of fairness, you can really — all of a sudden, a logic goes out the window and all of a sudden, you’re dealing with someone that maybe is looking at this out of an emotional — and that’s the focal point. They’re like, “This person, obviously I can’t trust them and they’re trying to take advantage of me. I’d rather, despite both of us, make the negotiation fail,” so make sure to pay attention to fairness.
Expand the Pie
Number seven, this one is perhaps my favorite, is expand the pie. I sort of talked about it a little bit earlier, but oftentimes in negotiation, we focus in on one thing versus actually creating trust, sharing information, looking are there multiple issues and are there multiple parties that could be involved?Whenever you do this, all of a sudden, you can take the pie that’s being split and you can expand it. Most people, when they’re negotiating, they often miss out on the point that the pie is limited, that there are scarce resources. Now, occasionally there are scarce resources, but a lot of times, there are a number of issues in play. You can bring in a number of players and you can in a sense make the whole thing bigger and you can create what are called win-win situations. That’s ideally where you want to go. Now, a great example is look in the basketball world. In the United States, we see these multi-team trades where you’ve got three teams, sometimes even four teams, and players are just going all over the place. Money is moving. Contracts are moving. At the end of the day, everyone is happy. Everyone agreed to this. No one put a gun to anyone’s head, at least that I know of, and made these trades happen. And so, because they involved multiple parties, they all of a sudden expanded the pie. They were able to do things that two people perhaps weren’t. Another way of expanding the pie is, again, talking. Whenever you’re negotiating a salary or you’re talking with a company, perhaps the company — if you’re pushing that you just don’t want to travel, but the whole reason they’re hiring you is they need you to travel, they’re willing to double your salary because to be honest, they’re incredibly profitable. They want you, but they want you to travel, so you’re going to have to find — okay, I’m a single guy. I’ll go ahead and take that extra bit of money. I’m not going to see my girlfriend as much, but this will enable us to save up for a house. Again, look how you can expand the pie.
Let’s go ahead and summarize really quick, guys.
- One, most people are ineffective when they negotiate.
- Number two, know yourself.
- Number three, know the other party. Know who you’re negotiating with.
- Number four, understand the situation.
- Number five, make the first offer.
- Number six, understand the power of fairness.
- Number seven, expand the pie.